Strategic planning

Strategic planning is deciding today what to do in the future. It sets the stage for the rest of the planning in the firm and consists of analy­sis and strategy. Strategic planning can be defined as the process of developing and maintaining a strategic fit between the organization's goals and capabilities and its changing marketing opportunities. It re­lies on developing a clear company mission, supporting objectives, a sound business portfolio, and coordinated functional strategies.

At the corporate level, the company first analyses its present po­sition and defines its overall purpose and mission. This mission is then turned into detailed supporting objectives that guide the whole company. Next, headquarters decides what portfolio of businesses and products is best for the company and how much support to give each one. Each business and product unit must in turn develop de-tailed marketing and other departmental plans that support the company-wide plan. Thus, marketing planning occurs at the busi­ness-unit, product, and market levels. It supports company strategic planning with more detailed planning for specific marketing op­portunities.

The first step in the strategic marketing management process is analysis. It consists of identifying the firms Strengths and Weaknesses as well as Opportunities and Threats. Note that the first letters in each of these words compose the acronym SWOT. A SWOT analysis con­sists of studying a firm's performance trends, resources, and capabili­ties to assess a firm's strengths and weaknesses, explicitly stating a firm's mission and objectives, and scanning the external environment to identify opportunities and threats facing the organization. A firm's strengths and weaknesses can be identified and ana­lyzed by studying performance trends, resources, and capabilities. Fast performance typically is measured in financial terms, such as sales and profits. Profits act as prophets, in a sense. For example, yearly increases in profits are a sign of strength, while a steady de­cline in profits indicates that the firm has a problem. Current re-sources and capabilities also help to determine a firm's strengths and weaknesses. Resources and capabilities refer to various things; special talents (i.e., the company has one of the most creative ad­vertising departments In the country), areas of expertise (i.e., the company is a beer producer and is the industry leader in developing new brewery technologies), unique assets (i.e. the company holds 12 patents on new products or has $ 50 million in available cash), or any other advantage that can be drawn on for support (i.e. a pharmaceutical company may have excellent working relationships

With retail druggists).

Opportunities and threats can be identified by stating the organiza­tion's mission and objectives and engaging in the process of environ­mental scanning.

The marketer wants to identify market opportunities that exist because there is an unmet or unsatisfied need or want in the mar­ketplace and for which the firm has an interest in and capability to satisfy. At the same time the marketer should try to convert threats into opportunities. For example, toy industry marketing managers should view the decline in birth rates as an opportunity to broaden their market base to appeal to adults by developing more sophisti­cated toys and games.

Defining the Company Mission

What is our business? Who is the customer? What do consumers value? What will our business be? What should our business be? These simple-sounding questions are among the most difficult the company will ever have to answer. Successful companies continu­ously raise these questions and answer them carefully and completely.

Many organizations develop formal mission statements that an­swer these questions. A mission statement is a statement of the or­ganization's purpose — what it wants to accomplish in the larger en­vironment. A clear mission statement acts as an «invisible hand» that guides people in the organization so that they can work independently and yet collectively toward overall organizational goals.

Companies traditionally defined their business in product terms, such as «We manufacture furniture,» or in technological terms, such as «We are a chemical-processing firm.» But market definitions of a business are better than product or technological definitions. Prod­ucts and technologies eventually become out-of-date, but basic mar­ket needs may last forever. A market-oriented mission statement de­fines the business in terms of satisfying basic customer needs. Thus, AT&T is in the communications business, not the telephone busi­ness. Visa defines its business not as credit cards, but as allowing customers to exchange value—to exchange such assets as cash on deposit or equity for virtually anything, anywhere in the world. And Sears's mission is not to run department stores but to provide a wide range of products and services that deliver value to middle-class, home-owning families.

Management should avoid making its mission too narrow or too broad. A leading pencil manufacturer that says it is in the communication equipment business is stating its mission too broadly. Mission statements should be specific and realistic. Many mission statements are written for public relations purposes and lack specific, workable guidelines. The statement «We want to become the leading company in this industry by producing the highest-quality products with the best service at the lowest prices» sounds good but is full of generalities and contradictions. It will not help the company make tough decisions.

Setting Company Objectives and Goals

The company's mission needs to be turned into detailed supporting objectives for each level of management. Each manager should have objectives and be responsible for reaching them.

Marketing strategies must be developed to support these marketing objectives. To increase its national market share, the company may increase its product's availability and promotion. To enter new foreign markets, the company may cut prices and target large farms abroad. These are its broad marketing strategies.

Designing the Business Portfolio

Guided by the company's mission statement and objectives, man­agement must now plan its business portfolio. A company's business portfolio is the collection of businesses and products that make up the company. The best business portfolio is the one that best fits the com­pany's strengths and weaknesses to opportunities in the environment. The company must (1) analyze its current business portfolio and de­cide which businesses should receive more, less, or no investment, and (2) develop growth strategies for adding new products or busi­nesses to the portfolio.

Analyzing the Current Business Portfolio

The major tool in strategic planning is business portfolio analy­sis, whereby management evaluates the businesses making up the company. The company will want to put strong resources into its more profitable businesses and phase down or drop its weaker busi­nesses. It can keep its portfolio of businesses up-to-date by with­drawing from declining businesses and strengthening or adding growing businesses.

Management's first step is to identify the key businesses making up the company. These can be called its strategic business units. A strate­gic business unit (SBU) is a unit of the company that has a separate mission and objectives and can be planned independently from other company businesses. An SBU can be a company division, a product line within a division, or sometimes a single product or brand.

The purpose of strategic planning is to find ways in which the company can best use its strengths to take advantage of attractive op­portunities in the environment.

The company must determine what role each will play in the fu­ture. One of four strategies can be pursued for each SBU. The com­pany can invest more in the business unit in order to build its share. Or it can invest just enough to hold the SBU's share at the current level. Or it can harvest the SBU, increasing its short-term cash flow by investing little or nothing in it regardless of the long-term effect. Finally, the company can divest the SBU by selling it or phasing it out and using the resources elsewhere.

Such analysis is no cure-all for finding the best strategy. But it can help management to understand the company's overall situation, to see how each business or product contributes, to assign resources to its businesses, and to orient the company for future success. When used properly, strategic planning is just one important aspect of over­all strategic management, a way of thinking about how to manage a business.